The dramatic decline of the economy in the second half of 2008 derailed agencies across the industry, many of which originally felt they were on pace for a record year. The reverberations from the faltering of the housing and securities sectors significantly impacted the PR industry's growth.
The agencies that submitted revenues and staff numbers for 2008 (holding company firms, as they do every year, cite Sarbanes-Oxley as grounds for not submitting exact figures) for the most part showed single-digit growth and slight increases in staffing. The double-digit growth exemptions among top-ranking firms include WeissComm Group (46%), OutCast Communications (26%), Coyne Public Relations (34%), and Makovsky & Company (20%).
Total growth for all companies that filed this year and last was 6.8%, notably down from the 15% of like firms in 2007. Growth seemed most attainable by the larger agencies, as the top 10 grew 7.6%; the top 20, 8.1%. Last year was harder on the small firms. Those that made less than $2 million and filed both years saw an average 3.5% drop. Among the biggest movers of firms under $5 million, Dukas PR grew 50% and JB Cumberland PR grew 48%.
Forty-eight firms that submitted rankings last year did not do so this year.
Edelman retained its top spot in our rankings, though its growth slowed from 22% in 2007 (highlighted in the 2008 Agency Business Report) to 9% in 2008 (highlighted in this year's report). Waggener Edstrom, which stayed in the second spot, grew at the same rate in 2008 as it did in 2007 (12%). Rounding out this year's top five were Ruder Finn, APCO, and Qorvis Communications, respectively. (MWW Group and Chandler Chicco Agency, two holding-company firms that ranked fifth and sixth last year, declined to submit exact figures this year).
For agencies that submitted staffing numbers in both 2007 and 2008, total staff grew 1%. Despite the fact that seven out of the top 20 firms reported decreased staff, overall numbers among those 20 agencies grew 5%. Edelman increased its staffing numbers from 1,780 in December 2007 to 1,896 as of December 2008. With revenues increasing to $287.46 million, the agency showed a slight per-employee revenue decrease from $153,644 in 2007 to $151,618 in 2008. Waggener Edstrom grew by 37 employees and boosted its revenue by a little more than $10 million, increasing its revenue per employee from $145,052 to $154,248.
Overall, total agency revenue grew 6.8%, while staffing numbers only rose 1%, suggesting that firms reached greater workforce efficiency.
For the second consecutive year, it was a relatively slow 12 months for acquisitions, apart from some major ones. The most talked-about M&A was Cohn & Wolfe's acquisition of GCI Group. C&W CEO Donna Imperato says the agency's revenue doubled as a result of the long-rumored union.
Ketchum also made a big purchase, nabbing Access Communications in October 2008. The move gave the Omnicom firm a tech presence much greater in the Silicon Valley than it had built organically.
For the past six years, most holding-company agencies, such as those owned by Interpublic, Omnicom, and WPP, have refused to disclose revenue figures, citing Sarbanes-Oxley. However, some publicly held firms did give a revenue range. Fleishman-Hillard's revenues remained over $500 million, with $400 million-plus in US revenue. Burson-Marsteller reported between $300 million and $400 million in global revenues, $100 million to $200 million in the US.
There are obviously a lot of challenges in 2009. Optimism for immediate recovery is in short supply. However, if agencies continue to monitor staffing levels in light of budget constraints, the industry could be primed for significant growth once the economy rebounds.
Keith O'Brien, editor-in-chief, PRWeek
Michael Kriak, CFO, Haymarket Media